CAIT urges govt to meet brands and audit business model of Amazon and Flipkart

The ongoing battle between offline retailers and e-commerce companies Amazon and Flipkart over unfair business practices is getting intense with each passing day.

After Amazon and Flipkart last week denied of having any role in offering a discount, the traders body the Confederation of All India Traders (CAIT) now has written to Commerce and Industry Minister Piyush Goyal to meet brands and initiate an audit into the business model of them to know the truth.

The government should convene a meeting with major brands to ascertain the truth. The business model of both companies (Amazon and Flipkart) should be audited by the government to arrive at a real conclusion, said the letter sent to the government by CAIT.  Entrackr has a copy of the letter.

It raised a question on the business model of e-comm firms.

These companies are incurring heavy losses for the last 5 years and still, they organise sales every year offering a huge discount. The body apprehends that in order to escalate the value of the companies, the investors are funding their losses, which enables them to offer huge discounts.

"It appears that it is not a business model but a valuation game of investors who are hugely benefitted when they exit their investment with multi-fold gain," mentioned the letter.

The trader's body further appealed to the minister to safeguard the genuine interest of the trading community and provide a level playing field for 70 million SMEs in the country.

The letter further added that it's not against the e-commerce business but unfair practices killing the SMEs.

On October 11, both Amazon and Flipkart refuted charges of flouting Foreign Direct Investment (FDI) norms and predatory pricing. They said brands on their platforms offer discounts.

"They did not own the responsibility citing their own explanations based on several flimsy grounds," CAIT said in the letter.

Both the e-comm firms failed to provide specific responses to trader body’s charges of deep discounting, predatory pricing and how marketplaces having control over the inventory, as per Sumit Aggarwal, CAIT’s social media head, who was present at the meet between CAIT and two marketplaces last week.

The trader body had also filed a petition with Rajasthan High Court against both the e-comm firms alleging FDI policy violations. The court had issued notices to both the marketplaces, central government and the Enforcement Directorate.